Better working capital management will ensure that you are minimising the stock losses, and bad debts, while also maximising the supplier discounts. This leads to better profit margins.
In addition to this, it is important to regularly critically review all expense items, to ensure that costs are minimised. For example, if your sales levels are reduced, then does your insurance policy need to be at last year’s level? When was the last time you shopped around and tendered for insurance, professional, legal and other fees? Have you carried out a review of your staff’s phone and wireless bills to ensure they are all on the correct tariff and costs are minimised? These are all simple tasks which need to be done as part of the annual budgeting process, but often don’t get done due to lack of time and internal resources.
Furthermore, it is important to establish staff productivity. Simple measures can be put in place to measure their relative performance. Each member of staff should also have a clearly defined role in the organisation, and planned career progression, if appropriate. This may require specific training programs. While these might seem like a discretionary cost, they are far cheaper than hiring a replacement should the employee become de-motivated and leave. By ensuring that each member of staff is properly valued, motivated and rewarded, profitability is improved.